The Teamsters’ Building Material Drivers Local 436 Pension Fund of Valley View, Ohio, has applied to the Treasury Department for a reduction in benefits under the Multiemployer Pension Reform Act of 2014 (MPRA). The pension’s trustees say that without the cuts, the fund will run of money to pay benefits by 2023.
Under the board of trustees’ proposed reduction plan, the benefits of all plan participants would be reduced to 110% of the Pension Benefit Guaranty Corporation (PBGC) guarantee, which is the maximum reduction in benefits allowable by law.
Excluded in the benefits reduction under federal law are disabled participants and their beneficiaries, and participants who are at least 80 years old on May 31, 2021. The benefits of participants who are at least 75 years old as of that date, and their beneficiaries, are partially protected, and the older the person is, the less the benefits can be reduced.
According to the application, the PBGC’s guarantee is equal to 100% of the first $11 of the plan’s monthly benefit rate, plus 75% of the next $33 of the monthly benefit rate, multiplied by the participants’ years of benefit service.
“The proposed suspension will remain in effect indefinitely and will not expire by its own terms,” said the fund in its application. “These reductions, combined with a partition, are projected to keep the plan from running out of money.”
The pension fund details in its application how the proposed reductions would affect various participants.
For example, a member who has 32 years of credited service who will be 70 years and 5 months old as of May 31, 2021 would see their $2,148.24 monthly benefit reduced to $1,258.40 beginning on May 1, 2021, under the proposed reduction plan. However, it notes that without a reduction, the plan will run out of money and their benefit would be reduced to $1,144.00 once the PBGC took over.
A plan member who will be 58 years and 9 months old as of May 31, 2021, with 30.07 years of service would have their current monthly benefit of $1,011.92 reduced to $927.70, which would be cut even further to $843.37 if the plan is not accepted, according to the pension’s trustees.
And a participant who will be 41 years and 9 months old as of May 31, 2021, with 12.811 years of service, who would start receiving retirement benefits on Sept. 1 2044, would see their monthly benefit reduced to $503.80 from $794.53 under the plan, and to $458 without the plan.
The Treasury Department is currently reviewing the application to see whether it meets all of the legal requirements under federal law, and has until February 10 to make a decision. The pension fund’s application is the only one currently under review by the Treasury.